BASF Profit Retreats on Falling Oil, Gas Prices
July 27 2016 - 04:20AM
Dow Jones News
BERLIN—BASF SE reported Wednesday a fall in profit in the second
quarter due to lower oil and gas prices and the disposal of a
business unit, and said its full-year outlook remained
ambitious.
The German chemical company's net profit was €1.09 billion
($1.19 billion) in the three months ending June 30, down 14% from
€1.27 billion a year earlier and missing analysts' €1.17 billion
consensus estimate.
Revenue declined 24% to €14.48 billion following the divestiture
of BASF's natural gas trading and storage business to Russia's OAO
Gazprom. Earnings before interest and taxes, EBIT, decreased 16% to
€1.72 billion.
BASF continues to predict a slight decline in full-year EBIT,
burdened by restructuring charges and based on an average oil price
of $40 per barrel. Chief Executive Kurt Bock said the outlook
"remains ambitious in the current volatile and challenging
environment, and is particularly dependent on further oil price
development."
"After the British vote to leave the European Union, economic
risks increased for Europe," said the company.
Operating results were overall in line with expectations despite
a weaker agricultural business and higher provisions for an
incentive program, said Bernstein Research analysts.
BASF's overall earnings have been weighed down for more than a
year by low global oil prices, which have directly hit its
wholly-owned oil and gas division, Wintershall Holding GmbH.
Germany's largest crude oil and natural gas producer,
Wintershall contributes around 30% to BASF's total cash flow. The
division offers BASF a strategic hedge when oil prices are high and
in the past it has been able to sustain the chemicals divisions'
need for energy and raw material.
In April, BASF Mr. Bock warned shareholders that low global oil
prices would continue to squeeze profitability at the company
throughout 2016.
BASF's chemical divisions have also been hurt by low raw
material prices. The company cited this volatility in June when it
announced it would delay a final decision on investing in the
construction of a methane-to-propylene complex at a BASF site in
Texas, a project that has been under consideration for around two
years.
Write to Friedrich Geiger at friedrich.geiger@wsj.com and
Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
July 27, 2016 04:05 ET (08:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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